United States: UK Government attempts to improve predictability of feed-in tariffs

The UK Government plans to make the feed-in tariff scheme for renewable energy more predictable for the future, saying the reforms “will provide greater confidence to consumers and industry investing in exciting renewable technologies such as solar power, anaerobic digestion, micro-CHP, wind and hydropower”.

Climate Change Minister Greg Barker says: “Instead of a scheme for the few, the new improved scheme will deliver for the many. Our new plans will see almost two and a half times more installations than originally projected by 2015 which is good news for the sustainable growth of the industry.

“We are proposing a more predictable and transparent scheme as the costs of technologies fall, ensuring a long term, predictable rate of return that will closely track changes in prices and deployment.”

Highlights for consumers:

A tariff of 21p/kWh will take effect from 1 April this year for domestic-size solar panels with an eligibility date on or after 3 March 2012. Other tariff reductions apply for larger installations;

Properties installing solar panels on or after 1 April this year will be required to produce an Energy Performance Certificate rating of ‘D’ or above to qualify for a full feed-in tariff. The previous proposals for a ‘C’ rating or a commitment for all Green Deal measures to be installed was seen as impractical at this stage;

From 1 April 2012, new ‘multi-installation’ tariff rates set at 80% of the standard tariffs will be introduced for solar PV installations where a single individual or organisation is already receiving feed-in tariffs for other solar PV installations. The threshold is set at more than 25 installations. Individuals or organisations with 25 or fewer installations will still be eligible for the individual rate. DECC is consulting on a proposal that social housing, community projects and distributed energy schemes be exempt from these multi-installation tariff rates; and

The tariff for micro-CHP installations will be increased to encourage its development.

Highlights for the renewable energy industry:

DECC is proposing to peg the subsidy levels to cost reductions and industry growth to provide more certainty for future investments. This should ensure that subsidy levels keep in step with the market. It builds on the German system and should remove the need for emergency reviews; and

Using budget flexibility to cover the overspend resulting from high solar PV uptake this year, while still allowing £460 million for new installations over the Spending Review period.

REA response

The Renewable Energy Association (REA) policy team says it is currently analysing the various documents to be found on DECC's website, but has released the following comments from Chief Executive Gaynor Hartnell:

“These proposals should help re-orientate the tariffs towards cost-effectiveness and greater predictability – which on principle is welcome.”

On the extra funding: “This was essential, as the budget was overspent. A transfer from the Renewables Obligation into the FIT is perfectly justified if it spent on projects which deliver renewables at a similar cost. It is more problematic if it ends up delivering far less bang for the buck.”

On the new upper limit of 21p for hydropower and small-scale wind: “Obviously this will be gravely disappointing to smaller projects unable to commission before the October, but the logic of capping the smallest bands is sound. On really windy, remote sites, these tariffs are probably still attractive. What won’t work is small wind turbines in the urban environment areas or places without a tip-top wind resource. Smaller hydro plant will now have no incentive to size themselves in order to maximise revenue, but to maximise output.

On solar PV: “For solar power, the FITs have an important role in tiding us over to the point where solar panels no longer need subsidy. On present trends this won’t be far away, but it will be delayed if we go backwards and starve the industry by reducing the tariffs too fast. These new tariff rates will be very challenging as the reductions seen over the past 12 months are unlikely to be repeated, because of global trade trends.”